Oil exploration is a dirty and dangerous business. One of the ways that some of the risk is mitigated is by the requirement for oil companies to post an Oil Well Bond. These bonds ensure that when the well is no longer producing it will be capped off in a way that does not impact the surrounding area. While most companies can be counted on to fulfill their requirements regarding these surety bonds, sometimes this requirement slips past even the most careful watchdog. That was the case in Utah recently.

Injection Wells Sited

It turns out that Newfield Exploration out of Texas did not post the required surety bonds when they were operating injection wells within the jurisdiction of the Ute Indian Reservation. The bonds would ensure that when these wells were closed off they would not impact the drinking water on the reservation. Since the passage of the Safe Water Drinking Act, all wells are required to post a surety bond for this very reason.

EPA Filing Moves Forward

The Environmental Protection Agency (EPA) filed a complaint against the company when they failed to provide two of the five requirements of the act. This included an inability to provide proof of financial responsibility with either an Oil Well Surety Bond or other form of financial responsibility. Newfield has been fined $600,000 and has agreed to pay it.
Although the complaint did not include any problems with spills, this penalty is a good reason to be sure that any company that is involved with the extraction industry researches thoroughly all of the requirements for the venture. This definitely includes any legislated requirements for surety bond coverage.

BuySurety Provides Bonding

If you are in a business that may have surety bond requirements, don’t take a chance. You may find yourself liable for fines because of the wrong kind or amount of surety bond coverage. BuySurety has been providing surety bonds to a wide variety of industries for decades. We have the background and expertise to provide the right kind of low cost coverage your business requires. We know the surety bond business thoroughly and can work with you to ensure you have the coverage you need at a price that suits your company budget.

In the recently completed state legislative sessions, quite a few states have made legislative revisions to how oil and gas lease procedures and their attendant performance bonds are handled. The majority of the bills reflect the growing interest in using hydraulic fracturing as part of the gas and oil extraction process.
They also reflect the growing demands of environmental concerns regarding the extraction industry. Many bills involve ensuring reclamation of the surface lands upon plugging of old wells. Links are provided to legislative online reports as well as BuySurety’s surety bond pages for more information on these specific surety bond types.

Alaska Surety Bonds

In Alaska legislature, Senate Bill 96 and House Bill 198 have both been scheduled for a hearing with their respective Resource Committees. Both of these bills will revise current laws for oil and gas leases by providing extensions that are conditional upon the posting of a performance bond.

Alabama Surety Bonds

The Alabama Legislative House introduced House Bill 503 that would allow surface mining operations that own abandoned wells to recover oil from oil sands upon the posting of a reclamation bond. This bond would provide a security that ground surfaces disturbed by the oil sand recovery would be reclaimed per written agreements.

Mississippi Surety Bonds

The House and Senate of the Mississippi Legislature have both adopted a conference report that is the basis for House Bill 1698 regarding oil and gas wells. Operators of horizontally drilled wells and recompletion wells will be required to post a $1 million performance bond at the time that they obtain a permit for the well. The bond will cover compensation for the repair and maintenance of roads damaged by drilling traffic in the county where the wells reside.

Nevada Surety Bonds

The State of Nevada’s Senate Bill 390 will authorize hydraulic fracturing for gas and oil drilling in the state. As part of the permit process, the Division of Environmental Protection may require a performance bond to ensure that dry or abandoned wells are plugged and that wells causing waste are repaired.

New York Surety Bonds

The New York Senate has introduced Senate Bill 24 and the New York Assembly has introduced Assembly Bill 6365 to regulate the introduction of the hydraulic fracturing method for natural gas drilling. Well operators will be required to furnish a reclamation bond that will be non-recoverable and bankruptcy proof to guarantee the costs of restoring the drilling site.
In addition, New York Senate Bill 4028 and Assembly Bill 3634 will establish the requirement of a reclamation bond to cover the costs of addressing contamination of natural gas sites. The bond would be directed by the Department of Environmental Conservation and would be tied to the owner’s or operator’s cleanup and decontamination performance.

Pennsylvania Surety Bonds

The Pennsylvania Senate has introduced SB 780, a bill that will require a surface use agreement between surface owners and the gas or oil well operators. A surety bond for $10,000 per well could be posted for the benefit of the land owner in lieu of the agreement. A blanket bond of $25,000 to cover all well locations, if in a readily payable form, would also be permitted.

South Dakota Surety Bonds

The enactment of South Dakota’s Senate Bill 1 has changed the requirements of the performance bonds currently required for oil and gas wells plugging. The new law increases the bonds for wells less than 5500 feet to $10,000 per well or a blanket bond $30,000. For wells over 5500 feet deep the surety bond has increased to $50,000 with a blanket bond of $100,000.

March 09, 2013 – The South Dakota House and Senate had a total of six bills in January and February of 2013 that were in the process of being passed and would have impact on the use of surety bonds. There were four bills introduced into the Senate and two bills introduced into the House.
The bills dealt with the question of the posting of surety bonds when plugging oil and gas wells or reclaiming mining sites, posting surety bonds as a public official to assure the proper performance of their duties as secretary-treasurer of a library district and requiring businesses involved in gaming activities to post a surety bond to ensure proper filing of gaming taxes. They also dealt with repealing the need for a surety bond by the Cendak Irrigation District’s treasurer.

South Dakota Senate Bill 1 – Reclamation Bonds – Oil and Gas Wells

This bill which has recently passed the Senate and is pending in the House would increase from $5,000 per well to $50,000 per well the required amount for a performance bond for plugging a well. The blanket bond would also be increased from $20,000 to $100,000 when posting a blanket bond to cover surety bond coverage for all wells.
In addition, this bill will repeal a requirement of a surface restoration bond from a landowner or lessee that is not party to the oil or gas leasing agreement. The bill was introduced into the House and passed the Agriculture and Natural Resources Committee on February 21, 2013. To access a complete reading of South Dakota Senate Bill 1, please use the link provided in this legislative summary.

South Dakota Senate Bill 141 – Reclamation Bonds – Mining

If passed, this bill would revise the bond requirements for reclaiming mining sites. Current requirements are the posting of a surety bond equal to the costs that would guarantee reclamation of affected private and public lands. The new bill would change this requirement to be twice this amount.
In addition, the current requirements of posting an additional financial bond to cover the cost of responding to and remediating any accidental release of cyanide or any other chemical or biological agents is now $100,000 plus triple the submitted cost of remediation. South Dakota Senate Bill 141 is now in review with the Senate Commerce and Energy Committee. For a look at the complete bill as it now stands in the legislature, use the link provided in this summary.

South Dakota Senate Bill 146 – Gaming Tax Bond

Currently with the Senate State Affairs Committee, Senate Bill 146 if passed will impose a gaming tax on businesses involved with certain gaming activities. It will also require a surety bond or certificate of deposit as security from any corporate officer, member-manager or manager of a company that is charged with the responsibility of making gaming tax returns or payments.
Any such person who does not post a surety bond will be held personally liable if such taxes are not filed for the company. The surety bond posted will be equal to the amount of taxes due. For a reading of the complete South Dakota Senate Bill 146 please use the link provided here.

South Dakota Senate Bill 165 – Public Officials Surety Bond

Senate Bill 165 would if passed establish Special Purpose Districts. These districts would be established for the creation and development of libraries. In each of these districts the designated secretary-treasurer would be required to post a public officials surety bond in the amount of $5,000.
This bill was introduced to the Senate January 23, 2013, was amended by the Local Government Committee and is being deferred for passage as of February 15, 2013. For a complete reading of South Dakota Senate Bill 165, please use the link provided in this bill summary.

South Dakota House Bill 1059 – Public Officials Bonds

This House bill will be revising and repealing various requirements regarding the Department of Environmental and Natural Resources. Amongst these changes will be the elimination of the requirement for the Cendak Irrigation District’s treasurer to be post a surety bond. It will also repeal the requirement for surety bonds on construction contracts for the District.
South Dakota Bill 1059 was introduced into the House on January 08, 2013, passed the Agriculture and Natural Resources Committee and the House vote and was sent to the Senate for reading on January 31, 2013. It is currently under review with the Senate Agriculture and Natural Resources Committee. For a complete reading of South Dakota House Bill 1059, please use the link provided in this legislative summary.

This bill was introduced to allow the licensing and regulation of private detective agencies in South Dakota. In addition to requiring all agencies to be licensed it would also require them to post a surety bond in the amount of $50,000. This surety bond would be posted as an assurance regarding any illegal acts done while conducting business.
It will ensure the recovery against the agency’s principal and its servants, officers, agents and employees if illegal or wrongful acts were committed. The legislature in the House for South Dakota had the first reading for House Bill 1182 on January 24, 2013 and passed it for a hearing with the Commerce and Energy Committee on February 06, 2013.For a complete reading of South Dakota House Bill 1182 please use the link provided to the legislative site.

In the Virginia legislature there were six House bills and four Senate bills passed that affected the posting of surety bonds. In the House bills were passed that affected the threshold of a bid bond, financial assurances for nutrient credits, the posting of a public official surety bond for an airport authority’s secretary treasurer, the requirements for a motor vehicle dealer’s license bond, the posting of a license and permit bond for a real estate appraisal management company, and the need for a public adjuster’s surety bond to be posted.
The Virginia Senate passed bills that will affect financial assurances for nutrient credits, the administration costs of subdivision bonds, claimant amounts on a motor vehicle dealer’s bond, and the posting of a public adjuster’s surety bond.

House Bill No. 945: Bond Threshold

With the passage of Virginia House Bill 945 the threshold for the posting of contractor’s surety bid bonds with the Department of Transportation will be increased from $250,000 to $350,000. The Department of Transportation will also be permitted to waive bid bonds on any bid where evidence of a contractor’s application for a bond has been declined by the surety company when the contract is for between $250,000 and $350,000 and the contractor has been prequalified by the Departments of Treasury and Transportation with a surety bond from the Treasury Department through its self-bonding program.
The Department of Transportation will be required to submit an annual report on:

How many companies were unable to obtain a bid bond

How many bond waivers were granted

How many contractors were enrolled in the self-bonding program

This bill was enacted on April 18, 2012 and went into law on July 1, 2012. For a full reading of the complete text to Virginia House Bill 945 simply follow our link to the legislative site in this bill summary.

Senate Bill No. 77/House Bill No. 176: Financial Assurance

The Virginia Senate Bill 77 and House Bill 176 direct the certification of specific nutrient credits in soil composition by the Virginia Soil and Water Conservation Board to include financial assurances as part of the requirements. These financial assurances can be in the form of a posting of a surety bond. These two bills were enacted on April 18, 2012 and became law on July 1, 2012. For a reading of the complete text to Virginia Senate Bill 77 and Virginia House Bill 176 simply follow the links provided here in the legislative bill summary.

House Bill No. 120: Public Officials

The Virginia House Bill 120 removed the requirement for the Tappahannock-Essex County Airport Authority’s secretary-treasurer to post a public officials surety bond for $50,000. They are no longer required to post any kind of bond at all. The bill was enacted on April 18, 2012 and passed into law on July 1, 2012. For a reading of the complete Virginia House Bill 120 you can use the link provided in this bill summary to the legislative page.

House Bill No. 171: License Bond—Motor Vehicle Dealers

Virginia House Bill 171 has made changes to the current requirements for a motor vehicle dealer’s license bond. The new requirements will provide for the bond to include liability for the attorney’s fees, which had been excluded in the previous requirements. This bill was enacted on February 28, 2012 and went into law on July 1, 2012. For an opportunity to read the complete text to Virginia House Bill 171 you can use the link provided in this bill summary.

Senate Bill No. 179: Subdivision Bonds

The Virginia Senate Bill 179 makes changes to the use of administration costs of a construction subdivision bond. Previously when a developer or owner defaulted, the local authority that holds the bond could use it for administrative costs. In the new regulations if the construction is completed and stays within the stated costs, the local authority can retain that part of the bond allowed for administrative costs that is not part of the construction costs estimate regardless of who actually completes the construction. Bill 179 was enacted on March 30, 2012 and went into law on July 1, 2012. For a reading of the complete text to Virginia Senate Bill 179 you can use the link provided in this summary.

Virginia House Bill 210 requires real estate management appraisal companies to post a $25,000 license and permit surety bond to guarantee their faithful performance of their obligations under the law. This bill also provides for the aggregate liability of the surety company to not exceed the principle sum of the bond provided. The bill was enacted on March 30, 2012 and went into law on July 1, 2012. For a reading of the complete bill you can follow our link to the legislative site posting on Virginia House Bill 210.

Senate Bill No. 421: License Bond—Motor Vehicle Dealers

Virginia Senate Bill 421 made two changes to the current provisions regarding claims on motor vehicle dealer license bonds for damages. The first change was that the claimant can recover damages up to $25,000, an increase from the existing limit of $20,000 on the current $50,000 surety bond.
The second change was that after January 1, 2013 that amount awarded will be increased to reflect the increase by percentage in the Consumer Price Index for used cars and trucks per the U.S. Bureau of Labor Statistics. Instead of the total aggregate liability being capped at $50,000 as is done currently, any loss or damages that exceed $50,000 will be paid from the Motor Vehicle Transaction Recovery Fund. This bill was enacted on March 06, 2012 and went into law on July 01, 2012. For a look at the complete text to Virginia Senate Bill 421, please use the link provided in this bill summary.

Senate Bill No. 520/House Bill No. 872: License Bond—Public Adjusters

The passing of Virginia Senate Bill 520 and House Bill 872 require any public adjuster to post a public officials surety bond in the amount of $50,000. This bond is to guarantee the compliant conducting of business according to all laws within the Commonwealth of Virginia. The bond must be issued by a surety bond company that is authorized to do business in Virginia by the State Corporation Commission and cannot be terminated unless 60 days written prior notice is given to such Commission. Senate Bill 520 and House Bill 872 were enacted on April 10, 2012 and became effective as of January 1, 2012. For a full reading of Virginia Senate Bill 520 and Virginia House Bill 872 you can use the link to their respective legislative pages that is provided in this summary.